Standing Committee A

[Mr. Joe Benton in the Chair]

Child Trust Funds Bill

Clause 12 - Subscription limits

George Osborne: I beg to move amendment No. 131, in
clause 12, page 6, line 34, leave out subsection (1).
 I welcome you, Mr. Benton, to the Chair. It is good to be back in Committee. Clause 12 deals with the amount of money that parents, friends and guardians, and even the children, will be able to put into child trust funds each year. I suspect that much of our time this morning will be spent debating this clause, as a number of amendments to it have been tabled. 
 This amendment is straightforward; it would remove subsection (1), which states: 
 ''No subscription may be made to a child trust fund otherwise than by way of a monetary payment.''
 That seems unnecessarily restrictive, a point raised on Second Reading by my hon. Friend the Member for Witney (Mr. Cameron). One must assume that the vast majority of payments into child trust funds will be monetary. Indeed, the Minister has said repeatedly that she envisages parents or relatives paying in £5 a month. We shall debate later what is allowed, but one imagines that in most cases cash will be taken to a building society, money will be transferred from a bank account or, as suggested in an earlier Liberal Democrat amendment, a portion of the child benefit will be paid directly into the fund. 
 I do not, therefore, suggest that the vast majority of payments will not be monetary. However, one can envisage parents, relatives or others wanting to make donations in other forms, such as shares or gilts. I am more interested in shares. It seems strange, and unnecessary, to require that they be turned into cash—with commission paid in the process—and then the cash paid into the child trust fund, where it is used to buy shares.

David Cameron: Are there not many parents who have shares in a share save scheme, which this and previous Governments have encouraged, or in a share option scheme? They may want to pass some of those shares to the child through the child trust fund. As my hon. Friend says, it makes no sense that they should have to pay commission to sell the shares, but the transaction may also trigger a capital gains tax or other liability. It would be much simpler to put the shares straight into the child trust fund.

George Osborne: My hon. Friend makes an extremely good point. He may want to elaborate on those points if he catches your eye, Mr. Benton, in this mini-debate. We are not necessarily talking about people with big share portfolios, or incredibly wealthy people who are trying to move around blocks of shares. Many will have fairly small shareholdings, perhaps in the company where they work. As my hon. Friend says, all sorts of tax liabilities could be triggered if the shares cannot be passed directly into a child trust fund.
 One of the Government's objectives is to build into the measure some financial education to help people to make better choices, and this seems as good a way as any of teaching people that money exists in forms other than cash, and that it can be transferred in forms other than cash. Indeed, we have had several debates about equities. One of the Financial Secretary's objectives is to create a broader understanding in society, particularly in lower income families, of the value of equities, and she and the hon. Member for Yeovil (Mr. Laws) have debated the subject. Surely, if the Minister wants to achieve her objective, it seems unnecessarily restrictive not to allow people to transfer money by way of equities. 
 I do not suggest that a huge number of people would use such a facility; indeed, not all financial providers would want to offer it. However, one can foresee some of them offering it as a unique selling point. Allowing people to transfer payments other than in monetary form would give providers something to market. The proposal seems straightforward, and I cannot see that there can be strong arguments against it. It would make the transfers to which my hon. Friend the Member for Witney referred much easier, and it would broaden people's understanding of equities in particular, and of other forms of money such as gilts. I shall be interested to hear the Financial Secretary's arguments against it.

Ruth Kelly: Although I understand the motive behind the hon. Gentleman's proposal, I have to point out that the scheme is not nearly as straightforward as he suggests. In designing the accounts, we have attempted to keep administration costs as low as possible, partly because of the charge cap requirements. The hon. Gentleman argues, reasonably, one might at first think, that those who are outside a charge cap, if that is determined in the regulations, should be allowed to accept shares and gilts on a voluntary basis.
 There are problems, however. A provider who accepted shares and gilts would have to arrange for a valuation of the shares at the time of receipt, which could take two to three weeks, and it would have to keep track of that batch of shares to ensure that their value did not exceed the annual limit that a parent, relative or child was able to contribute to the fund. If the value of the shares exceeded the limit in any year, the contributions would have to be returned to the family.

David Cameron: Is not the Financial Secretary slightly over-complicating matters? Surely the shares could be valued at the moment at which they went into the child
 trust fund, and that would count towards the £1,200 annual limit. They would not have to keep being revalued throughout the year.

Ruth Kelly: The hon. Gentleman makes a good point, and it is fairly straightforward to provide a reasonable valuation in the case of quoted shares. However, in the case of unquoted shares not only is it difficult to provide a valuation but in many instances it is easy to manipulate their value once the valuation has been made, to pump value into them. I am advised by the Inland Revenue that it would therefore be necessary to back up the legislation with a raft of anti-avoidance measures to ensure that parents did not use that device to conceal the value from the Revenue. Furthermore, having tested out the appetite of providers for accepting shares and gilts, we find that it is limited; they think that it is likely to be an extremely small market, only at the higher end. We should also bear it in mind that, particularly through the stakeholder account, we are trying to achieve an account that is risk controlled and works to the advantage of the child.

Michael Jabez Foster: Will my hon. Friend comment as to whether the proposal would have the capital gains advantage suggested by the Opposition? Surely the capital gains would still follow the shares and add another complication.

Ruth Kelly: My hon. Friend makes an extremely important point. The process is not as straightforward as Conservative Members suggest. If there were to be a risk-controlled stakeholder account, it would be extremely difficult for providers to apply the appropriate risk controls while having to keep in the account a separate batch of shares taken from a provider. For all those technical but important reasons, I ask the hon. Member for Tatton (Mr. Osborne) to withdraw the amendment.

George Osborne: I am not sure that I accept all the Financial Secretary's arguments. First, she made the curious assertion that she would have to keep track of the value of the shares throughout the year. Following that principle, presumably, she would also have to keep track of any monetary payment. For instance, if I made a £1,200 payment on the birthday of the child, we would have to keep track of that payment and of any gains that were made on the back of it during the year. It would probably exceed £1,200 by the second or third day. I am not sure why one would have to keep a track on the value of the shares. If they are worth less than £1,200 on the day they are transferred, they will fall within the subscription limit, and any subsequent gains will accrue to the child trust fund, so I do not understand the Minister's objection.
 Nor do I understand the objection to risk-controlled stakeholder accounts. As the Minister says, many child trust funds will be risk-controlled stakeholder accounts, but there is no requirement that they should be. There is nothing to prevent me from setting up a 
 child trust fund for my daughter and investing all £1,200 a year in IBM shares. That might not be a particularly sensible way to invest the money, but nothing in the regulations will require accounts to be risk controlled. There is one exception because the Government have made it clear that they will require providers of Revenue-allocated accounts to offer risk-controlled stakeholder accounts. Otherwise, there is no obligation for any child trust fund to be a risk-controlled stakeholder account, and parents will make their decision when they shop around. 
 The Minister said that there was limited interest among providers, and I take her word on that.

David Cameron: Is it not difficult to determine the level of interest in advance? About 11 million people now own shares; a growing number have shares in the businesses for which they work, or they have employee share-save schemes and will therefore end up with shares. If one wants to encourage a share-owning culture, why not also encourage a culture that believes in passing on some of those shares to one's children in the way that has been suggested?

George Osborne: My hon. Friend puts the argument very eloquently, and he is right about the level of interest. In an earlier debate, the Financial Secretary conceded that she was aware of only one financial provider that wanted to provide Revenue-allocated accounts, so there is limited interest in them, but that does not mean that the Government will not proceed with the policy. There may also be limited interest in transferring shares, but it is easy to foresee a changing financial climate in which people would be much more interested in making such transfers. The amendment would not require people to do so; it would merely provide an option.
 We are not talking only about the upper end of the income scale. As my hon. Friend said, there are 11 million shareholders in the UK. Indeed, if child trust funds go according to plan, we will have an entire nation of shareholders. It is easy to envisage that people will be very familiar with owning and transferring shares in 20 years' time. Subsection (1) is therefore unnecessarily restrictive, and the Government are tying their hands unnecessarily.

Ruth Kelly: I should emphasise the fact that one objective of the scheme was to achieve simplicity. The hon. Gentleman suggested that we would not, for some reason, need to keep track of the value of, for example, unquoted shares that parents had placed in a child trust fund. However, the value of such shares is extremely easy to manipulate, and it would be impossible to accept the amendment without backing it up with a raft of anti-avoidance legislation to prevent the Revenue from being manipulated.

David Cameron: Surely the Revenue, with all its expertise, has a way of telling whether a fair value has been put on non-quoted shares at the moment of transfer. Transfers between different parties take place all the time. I suspect that it would be rare for people to put non-quoted shares into a child trust fund. If they
 did, however, there would surely be a mechanism for working out rough fair value, and one would have to do so only once, at the time of transfer.

Ruth Kelly: As I said, the problem with unquoted shares is that their value can be manipulated. If people were intent on putting unquoted shares into the fund, one would have to ask oneself why. One possible reason would have to be that they intended to pump value into the share after the valuation date, so the process is not a simple one for the Revenue. It would need to be backed up by anti-avoidance legislation; indeed, we would need to create a whole new avenue of such legislation. On those grounds, I ask the hon. Member for Tatton to withdraw the amendment.

George Osborne: I do not want to add to the burdens of the departments of the Inland Revenue that deal with tax avoidance, as we know that they are pretty hopeless at doing their job at the moment—according to the all-party Public Accounts Committee report. The Financial Secretary and I are members of the Public Accounts Committee, and we both signed up to that report.
 I do not want to push the amendment to a Division. I ask the Financial Secretary to reflect on the debate that we have had today. The Inland Revenue may return to the matter if providers come forward with specific schemes and proposals that would allow the transfer of equities. However, I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn.

David Cameron: I beg to move amendment No. 45, in
clause 12, page 6, line 36, at beginning insert
 'Except where subsection (2A) applies,'.

Joe Benton: With this it will be convenient to discuss the following: Amendment No. 48, in
clause 12, page 6, line 39, at end insert— 
 '(2A) The maximum amount prescribed under regulations under subsection (2) shall not apply in any case where a person is, or persons are, entitled to Disability Living Allowance in respect of the child holding the child trust fund.'. 
New clause 14—Permitted withdrawal of amounts from funds relating to those eligible for Disability Living Allowance— 
 'In respect of the child trust funds where a person, or persons, are eligible for Disability Living Allowance in respect of the child by whom the fund is held, access to the amounts in the child trust funds shall be allowed before the child reaches the age of 18, but only where the conditions referred to in the Schedule are met.'. 
New schedule 1—Conditions for permitted withdrawal from funds relating to those eligible for Disability Living Allowance— 
 1 Access to amounts in a child trust fund to which section [permitted withdrawal of amounts from funds relating to those eligible for Disability Living Allowance] applies shall be permitted before the age of 18 in accordance with the provisions of this Schedule. 
 2 Any child trust fund to which section [permitted withdrawal of amounts from funds relating to those eligible for Disability Living Allowance] applies shall be nominated as a ''disabled child's trust fund''.
 3 A parent or, in the case of a child in care, a social worker, shall be nominated as the ''responsible adult'' in respect of such a fund. 
 4 A responsible adult nominated under paragraph 3 shall be able to access amounts in a disabled child's trust fund to spend on the child's behalf if the condition in paragraph 5 is met. 
 5 That condition is that the amounts are to be used for— 
 (a) the purchase or hire of equipment for use by the child in respect of their disability; 
 (b) payment for nursing, night or child care; 
 (c) payment for respite care or temporary residential care; or 
 (d) payment for any specialist medical or palliative service in respect of the child's disability. 
 6 At the end of each calendar year each adult that has withdrawn amounts in accordance with the provisions of paragraph 4 shall write to the Inland Revenue detailing expenditure of the kinds specified in paragraph 5. 
 7 In all possible cases the responsible adult shall consult the disabled child about any steps to spend monies from the disabled child's trust fund. 
 8 Regulations may be made for the purpose of the operation of the provisions of this Schedule.'.

David Cameron: The amendments relate to clause 12, which places a limit on the amount that one can subscribe to a child trust fund. At first sight, it might all look quite complicated. However, I do not want to be accused of complicating the Bill, as I believe that this is a simple matter. I raised the same issue on Second Reading, and I will be interested to hear what the Minister, having had time to reflect on that, has to say about it today.
 I should declare an interest. I hope to be a beneficiary of the Bill, as my wife is expecting a baby on 5 February. I hope that we can complete all the stages of the Bill before that, so that I can go on paternity leave. I would also be a beneficiary of these amendments, new clause and new schedule. I have a 22-month-old child called Ivan who is severely disabled with nearly 100 per cent. cerebral palsy and severe epilepsy. He pretty much needs 24-hour care, and is likely to for many years. That means that this is a subject close to my heart. 
 I have said that this is a simple matter. Essentially all that matter are the one amendment, the new clause and the new schedule. Amendment No. 45 is a technical amendment to make the others work. First, amendment No. 48 takes the limit off donations that can be made into the child trust fund if the child is disabled. It is a simple move. The current limit is £1,200, but I suggest that disabled children and families with disabled children should have no limit. We should remember that the tax forgone is only the tax on the revenue from the savings. There is no tax break for donating. I am not suggesting a significant revenue loss, merely the loss of income from the money put into the child trust fund. Secondly, new clause 14 allows the parent or guardian of the disabled child to access the money in the child trust fund before the age of 18. I accept that that would be a significant change to the concept of the Bill, but it is wholly worth while. Thirdly, new schedule 1 clearly sets out the purposes for which that money could be spent before the child is 18. 
 I have to admit that parliamentary draftsmanship is not one of my areas of expertise, and I am sure that Labour Members will be able to pick my 
 draftsmanship apart, but I have tried to show that the aim—helping disabled children and their families—is simple, that the principle is clear and that it can be done without any massive change to the Bill. 
 We will have to answer two questions, as we did when we discussed children in care. First, is it worth while to try to use the Bill to do something special for disabled children and their families? Secondly, is my way of going about it the right one? I will try to answer those questions and to consider—and, I hope, reject in advance—some of the potential objections to such an approach. 
 What is the justification for looking at child trust funds and asking whether we can do something different and better for disabled children? It is a good idea, and the more I think about it the more I like it. It involves a clearly defined group. Because of the disability living allowance we know how many disabled children there are, and their level of disability; that is how the disability living allowance works. That means that it would be possible to introduce the proposals for a clearly defined group. 
 It is difficult to find the exact number of children born with disabilities each year; perhaps the Minister can tell us the figure. However, I know that overall there are about 100,000 children with severe disabilities, so there would not be huge numbers of the disabled child trust funds that I am proposing. 
 There are different parts to my proposals. There is the delimiting of contributions to allow families with disabled children to put more into the fund, and the proposal to allow such children access the money before they are 18. The Committee could, if so minded, take one proposal without the other. I think that going for both is better, but we could just go for the proposal to remove the cap. 
 The justification for doing something for disabled children is that more disabled children are surviving birth, and many more are living much longer because of health and social care improvements and the advance of medical science. Near my constituency, there is a children's hospice, but in addition a hospice has had to be built for those adolescent and older, many of whom have life-threatening conditions. Those children are now living into adulthood. 
 The general problem is that although the NHS and science are improving at a great rate, social services are finding it difficult to keep up with that, and it is difficult for the support that we give to families with disabled children to keep up. My proposals would help families with disabled children to do more themselves. Also, it is the common aim of all parties to give disabled children more independence at 18 where possible. Sometimes their disability makes it nearly impossible, but on all occasions it will cost money, and in many circumstances the young person will need resources to make that possible.

Hilton Dawson: I intervene in great sympathy with what the hon. Gentleman proposes. As he said, young people with disabilities have every right to be independent, and
 certainly feel their independence at 18 quite as much as anyone else. However, does he see any danger in allowing adults to access a fund that should rightly be the young person's before that young person is 18, when ordinarily only the young person would be able to access it, and only after the age of 18?

David Cameron: That is a very good point. As I say, the Committee can take either my first proposal on its own, or both the first and second. I think that it would be better to take them both. Although the hon. Gentleman is right that it is great if, at the age of 18, the disabled person has that pot of money to help them to live an independent life, it is difficult for a disabled person to be independent at 18, and to get their housing and everything else that they need sorted out. The extra trust fund that I have suggested would make that easier.
 However, some disabled children will not make it to 18—let us be absolutely frank about it—and yet lots of people want to help them. That is what has struck me. Friends, community—all want to do something to help such families have a good quality of life. That is why the proposals could be a brilliant way of giving those families more independence to cope with the child's disability. I accept that there is a little tension between the two proposals, but I have tried, in new schedule 1, to set out a way in which a parent or guardian can be nominated as the responsible adult who would administer the trust fund on behalf of the child before that child is 18.

Hilton Dawson: Presumably with the participation of that child, where possible.

David Cameron: Absolutely. Paragraph 7 of the new schedule states:
 ''In all possible cases the responsible adult shall consult the disabled child about any steps to spend monies from the disabled child's trust fund.'' 
I have tried to anticipate the hon. Gentleman's point, although his contribution is helpful. 
 Also, many—but not all—services for disabled people are means-tested. If someone wants to change a house and put in a stairlift, a lift or a bath-hoist, sometimes the occupational therapist will say, ''Yes, that is part of the NHS so you can have that,'' and on other occasions, ''That's means tested so you have to spend the money yourself.'' My proposal that the disabled child trust fund would be delimited would enable families who are likely to fall foul of the means test to have the money in a dedicated account to help deal with the issue. Often, a relatively well-off family with both parents in work will not get the means-tested help for the alterations that they need to make to their house, even though they do not have a separate pot of money to allow them to put in a lift, a bath hoist and all the other things that they need. My proposal would get round that. 
 Social services will always be the Cinderella service to the health service. We hope that social care and home care will be as politically sexy as the NHS, but it is unlikely that it will ever happen. We can either wait for the magical moment when the Government say that they will improve social services at the same rate 
 as the NHS, or we can agree that we should do more to help people to help themselves. Anyone in any doubt about the provision for families with disabled children should look at the Audit Commission report, which is excellent. It states: 
 ''We found a lottery of provision. The services that disabled children, young people and their families are offered depend largely on where they live, and on how hard parents are able to push. Whether or not families have access to essential provision, such as short breaks, childcare and after-school clubs is often decided by what has been provided in the past, and on the particular diagnoses families present with. Practitioners struggle to turn innovative projects into long-term secure provision.'' 
The commission found a lottery of provision, and we should be working out how we can help families to help themselves. I hope that I have made the case for amendment No. 48. It would give real independence to disabled people when they reach 18. For those who will not achieve real independence because of their disability, it provides a pot of money to help them live happy, contented and fulfilling lives. 
 New clause 14 does not read very simply, but its effect would be simple: it allows access to the moneys held in the child trust fund before that child turns 18, and it specifies that that can be done only in accordance with new schedule 1. New schedule 1 is very straightforward and I like to think of it as a Ronseal amendment—it does exactly what it says on the tin. It clearly states that a child trust fund will be nominated as a disabled child trust fund if the child is being paid disability living allowance. It also states that there should be a parent or guardian, or social worker in the case of children in care, who will be nominated as the responsible adult with responsibilities for the fund. It then sets out the main purposes for which a person could dip into the fund to spend the money before the child reaches 18, and I think that I have struck the right balance between giving parents freedom to access the money and prescribing what is should be used for. 
 Paragraph 5 states: 
''the amounts are to be used for— 
 (a) the purchase or hire of equipment for use by the child in respect of their disability; 
 (b) payment for nursing, night or child care; 
 (c) payment for respite care or temporary residential care; or 
 (d) payment for any specialist medical or palliative service in respect of the child's disability.'' 
It sets out those things that families with disabled children desperately need. They get a huge amount from the NHS and social services, but I guarantee Members—they will know this from their constituency surgeries—that they always want more. Disabled children present a huge demand on people's time, and however much extra care they get from social services they often need more. How many times have people come into Members' surgeries and said that they need a respite care break from looking after their child? That often happens to me, so this is one of the most important things that we can do. The means that I suggest are one way of giving parents the freedom to decide how they want to do it and of ensuring that they have the money to do it. 
 I do not know whether one would call this anti-avoidance legislation, but paragraph 6 states: 
 ''At the end of each calendar year each adult that has withdrawn amounts in accordance with the provisions of paragraph 4 shall write to the Inland Revenue detailing expenditure of the kinds specified in paragraph 5.'' 
In other words, there must be some way of ensuring that the money is not being withdrawn by parents who are not using it for the proper purposes. I am not sure whether that would count as the toughest anti-avoidance legislation that the Revenue could produce, but I am sure that great brains could be put to work on it and could improve it. 
 Is new schedule 1 the right way of trying to use the Bill to help families with disabled children? I believe that it is very clear when taken with amendment No. 46. We know who the children are, how many there are, and that they need help when they reach 18. We know that our proposal would provide help and is very flexible, but what about dipping into the child trust fund before the child reaches 18? I believe that that would be a good idea, when one considers what the money could be used for. Necessary equipment such as bath hoists, lifts, pulleys and stair lifts could be hired or bought. We know from the Audit Commission report and our surgeries that there are huge waiting lists for those pieces of equipment. They usually turn up just as one's child has grown out of them, and one has to start all over again. Why not give more power and independence to the parents so that they can take care of these things themselves, especially as some equipment is means-tested? 
 On payment for nursing, night or child care, as I said, social services do try to do their best to stop families falling apart and to offer night and respite care. The other day at my surgery, a family with a child with cerebral palsy told me that they receive only an hour a week. That is simply not enough. Parents will never believe that they have enough. I am very lucky; a wonderful nurse from Kensington and Chelsea social services cares for my child three nights a week. On the other four nights, I admit that I dip into pocket and my wife and I pay for more care. She works, and so do I, if this is work. I have 70,000 constituents to look after, and one needs more care if one has a child who is awake half the night with epilepsy. The state will never be able to provide enough, so we should help people to do more themselves. 
 On payment for respite care or temporary residential care, Mencap conducted one of the best lobbying campaigns that I have ever seen. I recommend it. It was called Breaking Point, and it was superb. It found that eight out of 10 families with disabled children were close to breaking point and to giving up. One of the most significant reasons was that they do not have enough respite care breaks during which they can take a break from looking after their children. Nine out of 10 disabled children are looked after at home and not in an institution. Six out of 10 families interviewed by Mencap said that in the previous year they had had no break at all from caring, or had had a break so short that it was of no value. 
 Again, will the state ever be able to say, ''We will give respite care breaks of such and such a length to everyone who looks after a disabled child''? That would be lovely, but we all know the competing demands on the state's resources. Why not give the family a way of doing these things themselves? 
 The other condition in paragraph 5 is 
''payment for any specialist medical or palliative service in respect of the child's disability.'' 
Again, the NHS provides a wonderful service for disabled children, but parents and their children always want more. We all know from constituency cases about the shortage of speech, language and play therapists, and of people who deal with the diet of disabled children. Again, surely a disabled person's child trust fund would provide parents with a pot into which they could dip to try to improve their lot? 
 All the things for which I suggest the money could be used are essential. Some are means-tested, so my earlier argument applies. Parents with disabled children will always want more, and rightly so, because they want the best for their children. Above all, it would be such an easy way of helping those parents to receive that help. I stress that the community, family and friends all want to help, so what better way of helping them than to say, ''Put some money into my child's disabled persons trust fund''? That money can be used throughout the 18 years and when the child is 18. That is a tangible way of making a difference. People want to help but they do not know how to do so. The family can then decide how to spend the money. 
 In one step the Government would create something incredibly worth while for families with disabled children. I admit that I have not done as much consultation on the proposal as I should have, and between now and Report I will send a copy of it to some disability charities, social services departments and others. However, I think that there is something important in the proposal. 
 I will take a couple of minutes to examine some of the potential objections to the proposal, although I cannot imagine how anyone could object to it because it sounds so reasonable, clear and simple. However, I will think of a couple of objections. First, my Gladstonian Liberal Friend the hon. Member for Yeovil (Mr. Laws) may accuse me of setting up something that is too bureaucratic. The fact is that child trust funds will be set up anyway—for every child that is born a little child trust fund will be sitting there. I am merely proposing to make two specific changes in relation to disabled children's funds that will make them much more valuable. Dealing with the bureaucracy of trying to get a wheelchair or a standing frame involves weeks and weeks of delay, and when the thing turns up one has usually grown out of it. That is bureaucracy. Therefore, the proposal would be a minor bit of bureaucracy in order to overcome much greater bureaucracy. 
 The second objection concerns how one would check that the money was spent in the right way. I admit that my mechanism outlined in new schedule 1 is, perhaps, a bit simple. However, I am sure that my idea—people writing to the Inland Revenue with the receipts for the things that had been paid for and its having to okay it—could be sorted out by the brains at the Inland Revenue. 
 The third objection that I can think of, which is important, is that some would argue that the proposal would mostly benefit the better-off—those who can put money into their child trust fund, rather than those who cannot. I would argue against that on several grounds. As I have said, everyone—the community, family, friends and the Government—can contribute to the funds. If the Government want to give more to families with disabled children who are less well-off—they have already demonstrated that principle by doing it for everybody else—they can help: they can top-up. As some of those things are means-tested, it would help families who will be hit by the means test anyway to have the money to pay for the things that they need. My amendments create the vehicle for helping disabled children, and I am sure that the Government can improve it. 
 A fourth objection could be that it is too big a change to the Bill; that it is taking a neat little Bill and turning it into something else.

Andrew Robathan: Into something better.

David Cameron: My hon. Friend is much too generous in saying that. I do not think that it is turning the Bill into something else. The Bill often states that the detail should be set out in regulations, and the detail of my scheme could certainly be set out in that way.
 Above all, my proposed change would not only make the Bill more meaningful for the disabled, it would be a brilliant move for them. I think of my son, and of how much use such a fund would be to him at 18. I do not know whether he will make it to 18, but I do know that the proposal would be incredibly valuable. We look ahead and think of the things that have to be purchased: a car that takes a wheelchair; a stair lift; a lift, possibly; a bath-hoist; as well as the extra care. People will be trying to help, and if there were such a trust fund, it would be an incredibly valuable way of making a difference. After that rather long and, perhaps, over-passionate speech, I hope that other hon. Members will rise to support those modest, but I think rather sensible, proposals.

Hilton Dawson: I criticise the length of lots of Tory speeches, but I do not criticise the passion behind that one. The hon. Gentleman's idea is a remarkably good one. This is an excellent Bill, and that the whole concept of child trust funds is exciting because it opens up many creative possibilities for the future. None of us can define what the future will be like after generations of young adults have got their hands on this sort of asset, following a period in which they have built it up and gone through a whole educational process. The hon. Gentleman's proposal is a little taste of an exciting future.
 I have no doubt that the Minister will have difficulty in accepting the amendments as they stand. Further work needs to be done on them. The idea would benefit from further consultation with organisations such as the Disability Rights Commission. However, the proposal fits with the future model of social care that the Government want: it fits with a model in which more users of services are given the ability to determine their own services through direct payments. Increasingly, the rights of people with disabilities and of children and young people are being respected. Children and young people are increasingly being helped to participate in the fundamental decisions that affect their lives. 
 There are issues that need to be dealt with. The hon. Gentleman has addressed the means by which the funds could be accessed before the age of 18, but there are outstanding issues surrounding the purpose to which they could be put. However, the proposal has some exciting and innovative possibilities. It gives an opportunity to place major resources in the hands of children with disabilities and their parents. I entirely accept the point that those resources would not necessarily come from well-heeled families. We have all experienced the tremendous good will that there is in even the most impoverished communities towards children with disabilities and their families. Sometimes there is the difficulty that people do not know how they can be of practical use to those who are struggling with the issues that have been graphically described of a child who is awake all night and who is suffering a lot from the consequences of their disabilities. 
 There was some agitation on the Labour Benches because Members were genuinely taken by the strength of the hon. Gentleman's argument and the good idea that he has expressed. I hope that the Minister will be able to respond positively to the suggestion that has been made.

David Laws: I know that the hon. Member for Witney will be disappointed if I do not comment on his proposals. Therefore, I begin by congratulating him on tabling new clause 14 and new schedule 1: they raise important issues. As I have not tabled amendments on this matter, when he was speaking I was trying to anticipate what would be the objections of the Minister—and, perhaps, of the Gladstonian Liberals. The hon. Gentleman said that he could think of three objections: I can think of only two primary objections, and I will briefly address them.
 The first of them is the point raised by the hon. Gentleman that his proposals might be seen as skewed in favour of people from well-off backgrounds—of those whose families have high incomes. Although relatives and communities could make contributions, we should anticipate that those are the families that would primarily benefit from his proposal to lift the lid on the contributions that can be made to child trust fund accounts. Relatively large amounts can already be contributed and it would be difficult for many families to exceed those. There is a concern, which I 
 leave to the Minister to flesh out in more detail, that the hon. Gentleman's proposals may unfairly advantage children with disabilities from high-income backgrounds, over children who might be disadvantaged in other ways and from low-income backgrounds. 
 I am not sure that that is an overriding objection to the hon. Gentleman's proposal, because, as can be seen in the Government's attitude to tuition fees, we tend to assume that people from well off backgrounds are likely to have high incomes themselves, and vice versa. The hon. Gentleman refers to a class of individuals who could well be from affluent backgrounds, but who after the age of 18 might not be able to enter into employment, owing to their disabilities, and therefore risk suffering quite a falling-off in household income. However, I would not expect the Financial Secretary to argue that it would be impossible to adapt and administer the scheme to accommodate the hon. Gentleman's proposal, which should therefore receive either a green light or, at worst, an amber light. 
 I am hugely sympathetic to what the hon. Gentleman says about the more substantive issue of withdrawal from the accounts and the potential alternative uses of the money. In some ways he is arguing against the concept of the child trust fund and for the Government to give people money and allow them to make choices about what is in the interests of their children. We made that point on Second Reading. We argued that the Government did not necessarily know better than families whether such expenditure would be better used in early years education or in providing equipment and care, as the hon. Gentleman described. One could perhaps make a much bigger difference to the life chances of young children with such measures than by putting money into an account that cannot be accessed until the age of 18. 
 The hon. Member for Lancaster and Wyre (Mr. Dawson) raised a concern about parents accessing the accounts early and using them for purposes that would undermine the Government's intention to provide young people with an asset for future use, which is fundamental to the whole scheme. The hon. Member for Witney's proposal might result in the proceeds of the fund being used before the age of 18 for more valuable purposes than the Government's mechanism, but in ways that would cut against the spirit of the fund, which is not designed to provide money for assistance with early years learning, disability or caring. I anticipate that the Financial Secretary might say that the important purposes that the hon. Gentleman outlined would be better served by other Government policies. 
 To return more sympathetically to the hon. Gentleman's amendment, however, it raises the crucial issue of access, which we touched on in an earlier debate. One can anticipate many circumstances in which the overwhelming need of a child, particularly one with a disability, cannot be met other than through the child trust fund. The scheme would be seriously discredited if there were a large sum in the child trust 
 fund, but a young person who needed a vital operation that could not be paid for through the national health service was denied access to it. I am not sure whether the problem will be dealt with elsewhere in the Bill or in regulations, but, listening to the hon. Gentleman's comments, I was inclined to wonder how the child trust fund balances would be treated and be accessible for children with a terminal illness, although that is only a minority of children with disabilities, thank goodness. 
 How will the Government treat access to child trust funds for children who have terminal illnesses and who are unlikely to live beyond 12, 15 or 18? Under those circumstances, and for children who might be able to make good use of those resources at an earlier age—no doubt their parents would be able to do so—it would be absolutely barmy if those moneys could not be accessed. During the last sitting, we touched on the risk in all Government proposals that an idea, whether good or bad, could be discredited by one or two cases. That would seem barmy to the man in the street or the newspaper reporter in the Press Gallery. Most people would think it barmy if the account of a terminally ill child, who is likely to die before the age of 18, could not be touched and used for other purposes. 
 I am not sure that the hon. Gentleman will succeed in getting the Minister to go quite as far as he and I would probably like her to go in allowing parents to decide whether there are better uses for their children's trust fund moneys than those that the Government intend, because that cuts against the entire scheme, but he has at least raised a hugely important issue about the way in which child trust fund accounts may be accessible for terminally ill children. Although there will be a small number of such cases, I hope that the Minister will consider the issue and comment on it before Third Reading. 
 The hon. Gentleman has raised some important issues. I do not know whether the Minister will accept his amendments in their existing form, but I hope that she will respond positively and perhaps bring back her own proposals to touch on some of those points.

George Osborne: I do not have much to add to the speech made by my hon. Friend the Member for Witney. Some of the amendments that he has tabled are also in my name, although they are wholly his inspiration. He raised this matter on Second Reading, after which I tried to persuade him to serve on this Committee. He was reluctant to do so because—Labour Members may not know this—he is in charge of our Hutton response team, so he is pretty busy at the moment. I believe that Lord Hutton was originally expected to produce his report today. We must thank him for not doing so, because if he had my hon. Friend would not be here to make his excellent and powerful speech. I thank the hon. Members who spoke after him—the hon. Members for Lancaster and Wyre and for Yeovil—for their support.
 My hon. Friend is a personal friend. He gave a glimpse of the enormous burden that is placed on him and his wife by their son Ivan, although he would not 
 say that. In the past, he has pointed out to me the paradox that if parents give up on their child and basically say, ''I can't cope,'' the state steps in and does everything: it takes the child into care and provides 100 per cent. support. However, if the parents of a severely disabled child say, ''No, we're going to try and look after this child at home,'' there are many problems and the state is not as supportive as we would hope—not just financially, but with equipment and so on, as my hon. Friend has outlined. All that he proposes with the amendments is to allow people to help themselves to look after a child at home, and to avoid the state having to pay much more, which it might have to do if it were entirely to take on the care of such children. 
 Some hon. Members have touched on terminal illness, which the Government have considered. In the White Paper there is a small section on terminal illness, which is worth briefly talking about, although I was hoping to debate that specific point on Report. I do not suggest that all children with severe disabilities have terminal illnesses. The policy document ''Detailed proposals for the Child Trust Fund'' gives an insight into what the Government's objections are likely to be. It states: 
 ''Where a child develops a terminal illness, parents may want to access CTF funds to pay for medial treatment or a special holiday. Although entirely understandable, particularly where parents have made contributions to the fund, the Government is concerned that this would be very difficult to administer fairly and with sensitivity. 
 It is also possible that some people would make fraudulent claims to access the money in the CTF account.'' 
In the case of children with severe disabilities, some of those objections can be dealt with. Indeed, my hon. Friend did deal with them. The first objection is that fair and sensitive administration would be difficult. However, the disability living allowance—particularly the higher rate of that allowance—gives us an automatic definition of severely disabled children. We would not be relying on a doctor's report or some other sort of judgment. We could look to see whether the child is in receipt of disability living allowance. I suggest that we should consider recipients of the higher rate of allowance, rather than all recipients. So, we do have a way of dealing with the problem of fair and sensitive administration. 
 The other objection, which hon. Members have touched on, is that some people could make fraudulent claims to access money in the child trust fund account. Of course, it is possible to envisage some people using child trust funds as a tax avoidance mechanism, but it is highly unlikely that that would be a major problem for the Revenue or that a large number of people with severely disabled children would do that. Fraudulent claims relating to disabilities are a big problem anyway in society, as we all know. The objection is not a strong one. It is a good standard Inland Revenue objection to something, but if the Revenue sat back and thought about it, it would find that it is difficult to imagine large numbers of parents with severely disabled children using child trust funds as a tax avoidance scheme. 
 I ask the Minister to look sympathetically at what my hon. Friend said, and if she has objections to some of it, not to throw out the baby with the bathwater. She 
 could consider the limits on subscriptions, in particular. If she does not want to allow parents to access the funds before their child's 18th birthday—the proposal set out in new clause 14, tabled by my hon. Friend—perhaps she will consider whether we could at least allow disabled children to have the potential of a substantial child trust fund when they reach 18, which would enable them to lead a more independent life. 
 After consultation with my hon. Friend, we do not intend to push the amendment to a vote, because it is not the sort of thing that we want to divide the Committee on, and I do not want to embarrass the hon. Member for Lancaster and Wyre, who has been supportive. However, like other hon. Members, I hope that the Minister will not kill the proposal stone dead today and will at least agree to go away and think about it, and consider the details. We will hear what she has to say. I hope that if she does have good objections that stand up, she will bring them back so that we can discuss them in detail. That is the sort of debate that we could have on Report.

Ruth Kelly: I congratulate the hon. Member for Witney on his group of amendments, which I found forceful, interesting and creative. He highlights an opportunity that could be provided by the child trust fund and employs the sort of creativity that I would like to see applied to the fund as it develops over the coming years. I would also like to thank my hon. Friend the Member for Lancaster and Wyre and other members of the Committee who spoke in support of the proposal.
 The hon. Member for Witney proposes two significant changes, the first of which is that the annual limit on subscriptions be lifted altogether. In theory, I have some sympathy with the proposal. For practical reasons such as those suggested by the hon. Member for Tatton—including abuse, which is not likely, but could occur—it would probably be wiser to raise the limit significantly rather than to abolish it altogether. 
 I would not, however, be attracted to that proposal were it not also the intention to think about early access to the fund. In some respects, the difficulties that the hon. Member for Witney suggested that severely disabled children would face might be magnified if even more money from friends, family and relatives were committed to the fund. If a child in that category experienced severe difficulty gaining access beforehand, there would be even less chance of their having access to money that might otherwise be available to meet more immediate need. 
 The hon. Gentleman's proposal hinges rather on the second aspect that he put forward as a case for severely disabled children to have early access to the funds. Again, I have been struck by the force of his arguments. There could be difficult cases in which parents felt that a child had an overwhelming need to access funds provided not only by the Government but also by friends and family. The funds may have been committed before the disability was incurred, so the family find that sufficient resources are not available to meet immediate needs. It has been suggested that the 
 child trust fund should be used as a vehicle for others to contribute to a family and to the needs of a child, to enable the family to draw down those funds or the child to take advantage of them at the age of 18. 
 I would like to go away and consider the proposal, and to see whether we could work up a scheme to deal with such a category of person. I am advised that we could do that through regulation. The Committee will be relieved, perhaps, to hear that I do not wish to delay the regulations any further than they have been delayed to date. We must produce them at the earliest opportunity, so if it is possible to devise a scheme, I would introduce a further regulation, perhaps a few weeks later, to deal with the issue.

Michael Jabez Foster: If the Minister does that, I take it that the Opposition will not regard such a regulation as red tape.

Ruth Kelly: My hon. Friend makes a pertinent point. If it is possible to devise such a scheme without undue complexity—my initial instinct is that it must be—I will introduce a further regulation to deal with the issue.
 I was also struck by the arguments about terminal illness, which the Committee has already debated, and I shall consider whether parents of terminally ill children should have earlier access to the fund. On that basis, I hope that the hon. Member for Witney will withdraw the amendment.

David Cameron: I am encouraged by that positive response and grateful that the Minister has given the matter time and thought. She explained very convincingly why the two proposals go together well. Otherwise, a great deal of money would go into a fund that a family could not access even though they had a huge need for it.
 While the Minister was speaking, I thought of another objection to not taking action. Disabled children may get very ill at some stage and need extra help and extra money spent on them. I understand that the fund goes to the parents if a child dies. It would be awful if some sort of grey market were to build up in which parents would go to a bank, or somewhere else, and say, ''We need to spend some money on our child, who is desperately ill. Can we borrow against the child trust fund, which we will have when our child dies?'' It would be much better to allow them access to the money in the fund. 
 That is another reason why I am so keen on this proposal. In her positive response, the Minister said that she would consider introducing regulations to do something along those lines. I hope that she can involve me and other interested members of the Committee in that process as much as possible. It is something worth considering that will make a real difference to people's lives. I am hugely encouraged by her positive response and I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn.

George Osborne: I beg to move amendment No. 132, in
clause 12, page 6, line 36, leave out 'Regulations may prescribe'.

Joe Benton: With this it will be convenient to discuss the following:
 Amendment No. 133, in 
clause 12, page 6, line 37, after 'year', insert 
 'shall be £1,200, or such greater amount as may be prescribed by regulations'.

George Osborne: This should be a fairly short debate. The amendment is a probing one. I am seeking to include in the Bill something that we know, from the White Paper and the explanatory notes, will be the case, which is that the subscription limit will be set at £1,200 or more a year.
 Another reason for tabling the amendment is that I would like the Minister to explain to the Committee why she felt that £1,200 was the right amount. She will know that when the measure was initially proposed in 2001, the idea was that the limit would be £1,000. It was helpful of her to increase that limit to £1,200, not least because that figure is more easily divided by 12. That makes it easier to allow a simple monthly contribution, and the financial industry has very much welcomed that change. It would be interesting to hear from the Minister what was the logic behind the decision to set the limit at £1,200. Why that sum? Why not halve it or double it? 
 Although £1,200 is easily divisible by 12, I would also like to know if the limit would rise with inflation. What mechanism will allow the limit to rise? Will that be done by regulation each year? As £1,200 is easily divisible by 12, might there not be a temptation to stick with that limit for a long time until we reached a point at which we could create a new limit that is easily divisible by 12? Perhaps I have missed this point in all the consultation papers I have read, but I have not seen anywhere a Government explanation of how the amount will rise. Similarly, I have not seen any explanation of whether the other financial amounts set out in regulations—the vouchers, the subscription limits and so on—will rise automatically each year, or whether the Government will have to introduce regulations, in which case it will be unlikely to happen each year.

Ruth Kelly: The hon. Gentleman points out an important change that we made to the original proposals, which was to increase the £1,000 limit to £1,200. As he correctly points out to the Committee, that figure is easily divisible by 12. The rise is significant: it was requested by providers, and it makes it easier for regular contributions to be made throughout the year. Why did we pick that figure? Partly because it seemed to provide ample margin for families to save more for their children's future that they do at the moment, while limiting the opportunities for tax avoidance that could be fuelled by the child trust fund.
 The hon. Gentleman asked how we intend to uprate that figure in the future. I can confirm that we will treat the child trust fund limits in precisely the same way that we treat the ISA limit: any uprating will be made in the Budget or through regulations. There is no provision in the Bill for automatic indexation.

George Osborne: I said that this would be a short debate, particularly as we just had a long, and more interesting, one. I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn.

David Laws: I beg to move amendment No. 164, in
clause 12, page 6, line 39, at end insert—
 '(2A) Regulations shall prescribe a minimum amount for a subscription by any individual into a single child trust fund in any one month and the minimum amount so prescribed shall not be above £5.'.
 We are still discussing clause 12, which deals with additional contributions that can be made into CTF accounts. I am not sure how far we will get in the discussion of other clauses, but when I was preparing for this morning's sitting I noticed that there was a theme to the amendments that we had tabled. That theme is the extent to which the Government need to ensure that the CTF account is accessible, fair and as usable as possible for those on lower incomes. 
 Some of the amendments demonstrate that the Government's attitude to issues that affect low-income families contrasts with their attitude to those that affect people who may make much larger contributions into CTF accounts. I hope, therefore, that the amendments, particularly No. 164, ensure that the Government's stated intention in relation to child trust funds is satisfied by the regulations and by what is in the Bill. I hope that we will end up with a fund that is accessible for people on low incomes, rather than just those on high incomes, who probably make a lot of savings already, and probably will not benefit as significantly from the Bill. 
 We know that people on higher incomes already tend to save a relatively large amount and that they make provision through other tax-advantaged savings instruments. The Bill, and the Government, will undoubtedly be judged not only on the total amount that goes into child trust funds, but on how much people on low incomes are able to save. The significance of the amendment is that it would ensure that people on low incomes were able to save a low monthly amount, rather than the Government introducing a high subscriptions threshold. 
 We had an indication early on in the Government's consultations on the Bill that they were minded to make the child trust fund as accessible as possible to people on low incomes. On page 11 of the consultative document issued by the Treasury and the Inland Revenue, which details proposals for the child trust fund, there is an illustrated projection for fund growth. That shows the Government's assessment of the total final value of the fund, following the initial endowments and given various assumptions about the amount of additional saving that will be made. 
 The first assumption is that individuals will save £5 a month and put that into the child trust fund. That sounds like the sort of amount that a family on a lower income would be able to save. The suggestion that the Government wanted people to be able to make 
 monthly savings as low as that seemed to be underlined by the Minister when she was in front of the Treasury Committee. She told its Chairman that: 
 ''The fact is that this policy which gives most to those who need it most could, for the first time, make a really significant difference to people who have never had any financial asset behind them at all.'' 
She continued: 
 ''If you add even £5 a month which is something that most families could afford or perhaps grandparents or friends' contributions could make up, that will mean that even on the basis of just an initial endowment that would be worth almost £2,600''. 
In other words, the Minister seemed to be indicating that she wanted the child trust fund to be able to accept contributions of as little as £5 a month to ensure that it was effective for low-income families. 
 We know that during that period other groups and financial market providers made many representations to the Inland Revenue suggesting that the minimum monthly amount should be far higher. Giving evidence to the Treasury Committee, the director of distribution strategy at Norwich Union, Mr. Robert Fletcher, said that it felt that the appropriate minimum amount would be between £50 and £100 a month, which would make it economical to write such contracts. Other providers also said that they wanted to ensure that the minimum contribution was far higher than the amount initially proposed by the Financial Secretary and the Government. 
 The concern is quite obvious. The Government's level would potentially cut off access to the account and make it less attractive to people on lower incomes. The National Consumer Council's evidence to the Select Committee about minimum contributions included the statement that 
''if the Government wants it''— 
the CTF account— 
''to be accessible to disadvantaged families (including children when they get older), then even smaller, over-the-counter contributions''— 
which would be smaller than the £20 that the Government were talking about— 
''will need to be possible.'' 
The council also said: 
 ''Between 12 and 15 per cent. of households have no current account at all, so some parents may not actually at the present time have the option of a direct debit payment into CTF accounts.''

George Osborne: Does the hon. Gentleman agree that the matter is inextricably linked to the debate about the charge cap? The reason that the financial providers have said that they would not be able to accept contributions of less than £20 is that they were working on the assumption of a 1 per cent. charge cap. They thought that it would be very difficult for them to make any return if they were forced to accept smaller amounts. I am very sympathetic to the intention of the amendment, which is to allow people to make very small contributions of the kind that the Minister has repeatedly used as an example.

David Laws: The hon. Gentleman is entirely right. The issue is linked, particularly in the minds of providers, with the returns that they will receive from the
 accounts and the charges that they will apply. Presumably, they feel that the administrative costs of dealing with small amounts will be high, and that if the charge is set low it will not cover those costs.
 As I said when we touched on charges, the Financial Secretary should approach with caution the representations that have been made. If I were a provider, I would be saying the same things that providers said in their evidence to the Select Committee, and I would be looking to increase as far as possible the terms on the accounts. 
 When the Minister introduces the regulations, we will find out whether it is necessary for the Government to make the suggested trade-offs over charges. There would be concern if she were to allow the charge cap to rise significantly because that would potentially eat into the value of the accounts for people on low incomes. There is concern from both perspectives. 
 In tabling the amendment, we were concerned that the Government might be moving away from the low minimum contribution level. The Minister's latest comments seem to suggest a watering down of the Government's intention to have a £5 subscription limit. When she spoke on Second Reading on 15 December 2003, she cited the example of how much somebody on a low income might save, but the amount had increased from the £5 level that was included in the document and mentioned to the Select Committee, to £10—an amount that would accrue £4,500. 
 You may remember, Mr. Benton, as I think you were in the Chair at the time, that when we discussed charges I pressed the Minister on the £5 minimum contribution. By then, even the £10 amount had disappeared and she was able to say only: 
 ''I am certainly aware of the impact of minimum contribution levels for people in the lower socio-economic groups, and want to ensure that the child trust fund is available to them as a savings vehicle. That is one of the matters that I will bear in mind. The minimum contribution level will be set out in the regulations, alongside the level of the charge cap.''—[Official Report, Standing Committee A, 6 January 2004; c. 55.] 
Perhaps I have been reading too many of the Minister's contributions, and I certainly hope that I have been reading too much into them because there seems to have been some backsliding. She seems to be moving from her initial minimum contribution level of £5 towards the level suggested by the financial market providers of £20, £50 or £100. 
 We tend in this country to have a savings regime, and sometimes a public debate, that assumes that middle-income Britain is middle Press Gallery Britain and that incomes of £40,000 and £50,000 are typical of the average family. The Daily Mail commented on that the other day when referring to council tax issues. The debate is sometimes wholly detached from the reality of the vast majority of people, whose incomes are generally far too low to save and whose savings aspirations would involve much smaller amounts than the £50 or £100 a month discussed by the Norwich Union. 
 I recently became godfather to the child of a friend of mine and thought that I was being generous in setting up a pre-CTF account with a contribution 
 equivalent to less than £10 a month. [Hon. Members: ''Stingy.''] I thought that that amount, which is higher than the minimum contribution level that the Government have been talking about but lower than £7, was reasonably generous. I now discover that I may even fall foul of the minimum level that the Financial Secretary is setting for all my constituents, and my income is much higher than theirs. I may feel guilty and have to increase my contribution if the child's parents find out about that. 
 I want to be reassured that not only is my contribution set at a reasonable amount, but that people who may be not stingy but unable to save huge amounts each month are able to do so. I urge the Financial Secretary to take advantage of this opportunity to continue her constructive approach by telling me that I have been reading too much into her comments and that when the regulations emerge shortly they will reinstate the £5 minimum subscription limit, and not move to a higher and less achievable level.

Ruth Kelly: The hon. Gentleman has clearly been reading too many of my speeches and reading too much into them. I am grateful for his commitment to widening access to the child trust fund and to the concept itself. It strikes me that it is slightly inconsistent with his public position on the merits of the proposal.
 I can reconfirm to the Committee that I am committed to allowing as many people as possible to make supplementary contributions consistent with the chosen level of the charge cap. I shall not today set out precisely what that minimum contribution level will be because it is intrinsically linked to the decision on the charge cap. However, I can say that when the charge cap is set, it is highly likely that there will be competition below the level of the charge cap. Providers will compete not just on their annual charges, but on other features of the fund, including the minimum contribution level. They will have to state explicitly to people taking out a child trust fund precisely what the minimum contribution requirements are and whether modest contributions, perhaps by direct debit, are acceptable so that people can make an informed choice about what sort of child trust fund suits them best. 
 I can only repeat today that I am mindful of the impact of the minimum level of contributions. In no sense do I want that level to be set at one of the higher amounts to which the hon. Gentleman referred. We are discussing with the industry what level of minimum contribution would be acceptable to it and consistent with wide access for all socio-economic groups. On that basis, I ask the hon. Gentleman to withdraw his amendment.

David Laws: I am grateful to the Financial Secretary, but she did not give a strong enough commitment on the question of ensuring that the minimum subscription amount is kept down. This is a crucial issue. We have suffered for far too long in respect of all
 savings vehicles, including the pension tax regime, from there being significant incentives to save for people on higher incomes—a huge proportion of tax relief on pensions goes to them—but not to those further down the income scale. It is essential that the child trust fund should have a low minimum subscription level. I do not want to delay the Committee, but this is such an important matter that I shall press the amendment to a Division.
 Question put, That the amendment be made:—
The Committee divided: Ayes 3, Noes 10.

Question accordingly negatived.

George Osborne: I beg to move amendment No. 134, in
clause 12, page 6, line 41, after second 'the', insert
'first day of the month that includes the'.

Joe Benton: With this it will be convenient to discuss amendment No. 135, in
clause 12, page 6, line 42, leave out 'immediately before' and insert 
 'on the first day of the month following that which includes'.

George Osborne: This again will be a short debate. I shall not press the amendment to a Division; indeed, since tabling the amendment, I have rather gone off the idea.
 The clause sets the subscription limit of £1,200 to run from one birthday to the next—that is how it defines a year. When I was burning the midnight oil and thinking of amendments, it struck me that it is rather complex to require the provider to have a different annual limit for every account—there will be at least 365 different annual periods. The amendment was an attempt to make that a little easier by defining the period as being from the month in which the birthday falls to the same month next year. It may have made it easier to administer the scheme and reduce administrative costs. I was waiting for the financial providers to come over the hills like the seventh cavalry, but instead they came over the hill and said that the idea was rubbish. 
 I do not intend to press the amendment, but it would be interesting to hear why the Financial Secretary ruled out other options, the most obvious of which would be for the period to start at the beginning of the financial year or the calendar year—or even the school year. Everyone would then have the same annual period. Various options were at the Government's disposal; it would be interesting to hear why they chose to run from one birthday to the next.

Ruth Kelly: The hon. Gentleman put his finger on the appropriate button when he said that providers were not keen on his alternative suggestion. They have been used to working with TESSAs without any problem. The anniversary for subscriptions to such accounts is not the tax year and is different for each investor. We propose a similar model for child trust funds, based on the child's date of birth. I therefore ask the hon. Gentleman to withdraw the amendment.

George Osborne: I shall not pursue my lost cause, so I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn.

David Laws: I beg to move amendment No. 172, in
clause 12, page 6, line 43, at end add—
 '(4) The Inland Revenue shall publish, by 31st March 2005, proposals to allow direct payments of child benefit to child trust fund accounts.'.
 This is a simple probing amendment, which I shall not push to a Division. It is designed to explore whether the Government intend to introduce proposals to allow direct payments of child benefit into child trust fund accounts. The hon. Member for Tatton touched on the issue earlier.

Ruth Kelly: I should point out that whether a parent decides to contribute an amount equal in value to child benefit to the child trust fund is a very different matter from whether the Government recommend and provide that option directly to parents. The primary purpose of child benefit is to provide financial assistance to families bringing up children so that they can meet current financial needs. Families may decide to lock some of their current resources away until the child reaches 18, although it is perhaps more likely that another relative, such as a grandparent or a godparent, will decide to use the child trust fund as a vehicle to promote the child's best interests over the longer term. However, it would not be responsible of the Government to suggest that families seriously consider putting all their child benefit directly into the child trust fund account.

David Laws: I certainly was not suggesting that families would want to pay all their child benefit into the account, and each family would obviously have to make a choice. I was exploring whether the Government wanted to enable people to make direct payments from child benefit into a child trust fund account.
 The Minister expressed concern that we might in some way encourage people on very low incomes to put into a savings vehicle money that would otherwise have gone towards expenditure on basic items such as the child's food and clothing. Of course, one could express the same concern about the whole child trust fund proposal, given that many people on low incomes give priority to using their money for current expenditure rather than savings. 
 I will not press the amendment to a Division. However, there may be a problem with the minimum contribution to child trust fund accounts, and it may 
 be expensive to accept contributions that are made in a particular way unless there is a very high charge. Therefore, I wonder whether there would be some benefit in allowing direct payments from child benefit, if it turned out that that was cheaper than people making payments in a different way. That might allow families on low incomes to save small amounts without incurring the cost that would otherwise arise. I beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn. 
 Question proposed, That the clause stand part of the Bill.

Joe Benton: With this it will be convenient to discuss new clause 9—Subscriptions and deprivation of capital—
 'Subscriptions to child trust funds shall not be considered to constitute deprivation of capital in respect of entitlement to any benefits, tax credits or pensions credit.'.

David Laws: New clause 9 deals with subscriptions to child trust fund accounts and with whether there could be a problem with deprivation of capital regulations. On several occasions, I have quoted from the Treasury Committee report and, in particular, from the many contributions by the hon. Member for Newcastle upon Tyne, Central (Mr. Cousins) in the evidence sessions. As I said earlier, one of my concerns in the present cluster of amendments and clauses is to ensure that the child trust fund account is designed with the interests of people on low incomes in mind, rather then merely to facilitate the saving of those people who may have large contributions to make. We will address that later.
 The hon. Gentleman raised the issue of deprivation of capital with the Minister at the Treasury Sub-Committee evidence session on 3 December. She confirmed that 
''a small contribution to a Child Trust Fund would be looked at by the Department of Work and Pensions'' 
and that it has 
''a policy which is a humane one, a reasonable one.'' 
Mr. Holgate, the director of welfare reform at the Treasury, also commented on the hon. Gentleman's worry that a contribution from, for example, a family member into a child trust fund account might fall foul of the Government regulations which do not allow for deprivation of capital in circumstances where people are perceived to be making payments in order to run down their capital so that they are advantaged in relation to the benefit system. He said: 
 ''Inevitably, if uncomfortably, there has to be some discretion for the Department for Work and Pensions to ask itself and ask the claimant whether the deprivation of capital has been in order to increase the entitlement to that benefit or not. That is the test they seek to apply.'' 
He went on: 
 ''I am afraid essentially I think the answer is that the DWP has to decide whether there has been an intent on behalf of the person giving the money to deprive him or herself of the capital with a view to increasing their benefit, their pension credit entitlement.'' 
As the Minister knows, the hon. Gentleman is an experienced and knowledgeable member of the Treasury Committee, and he has a habit of asking nasty questions on subjects that initially seem to be 
 minor but which turn out to be more uncomfortable than expected. He pointed out that, within the pension credit system that the Government have introduced, 
''the gift of money to a relative is not regarded as being an acceptable use of capital, it is regarded as being deprivation of capital.'' 
In reply to the question about whether money that might be a gift to a relative into the child trust account would be caught under the deprivation of capital rules, the Minister said: 
 ''In the end it is a matter of judgment to decide whether the intention was to increase entitlement to a particular Social Security benefit or credit. There is an element of discretion there. The fact of the matter is that it is very unlikely that a modest contribution to the Child Trust Fund would fall into that category.'' 
That exchange highlighted not only the concern about whether the child trust fund could at some stage affect entitlement to benefits but whether people who are making payments into it could also be caught under the deprivation of capital rules. The problem that the hon. Gentleman highlighted is that within the pension credit system the gift of money to a relative is now not regarded as an acceptable use of capital, but as being deprivation of capital. Therefore, it would be possible—and likely, even—that it would fall foul of the current rules and regulations that are intended to prevent benefit fraud or abuse of the benefit system. 
 I am worried about the fact that complex judgments about whether people have deliberately deprived themselves of capital will have to be made by Department for Work and Pensions officials. I hope that the Financial Secretary is also concerned about that. I do not know how those officials will make such assessments without an enormously bureaucratic—and, potentially, very arbitrary—process. If the Minister really wants to give incentives to people to make payments into the child trust fund account, she should want there to be certainty about their situation when they make a contribution. 
 The Minister should also want to ensure that the relatives of children from low-income families can benefit from payments made into child trust fund accounts. It will already be a big problem for children from low-income families to ensure that their account balances and growth match those of children from high-income families. If the Minister is to address that point, she must ensure that relatives and others who can contribute to the fund can do so without falling foul of the regulations. 
 Who is likely to fall foul of the regulations? Obviously, families from low-income groups may be affected by regulations that are designed to affect people who access the benefit system. Other parts of the Bill make changes for people on higher incomes—we shall deal with tax relief later—and the Inland Revenue has amended current regulations regarding the avoidance of tax relief to make the scheme work for people on high incomes who would otherwise have been liable for tax in the future. The Minister has been willing to make those changes for people on high incomes, so she needs to be willing to go the extra mile 
 for people on lower incomes to ensure that it is clear which contributions can be made, and that relatives can safely make contributions to these accounts without the Department for Work and Pensions and their fraud investigators suddenly investigating them in a possibly frightening way. The decisions taken could be entirely arbitrary, and I hope that the Minister will be able to offer some comfort and clarification.

George Osborne: The hon. Gentleman has hit on an important point. It is part of a broader theme, which we will discuss in other sittings, about the interaction of the benefit system and contribution to and gains from child trust funds.
 I do not want to add much to what the hon. Gentleman said, except to say that he did not do full justice to Mr. Holgate's evidence to the Treasury Committee. There was a brilliant series of exchanges between Members of the Committee and Mr. Holgate, the director of welfare reform and the brains behind the child trust funds, which were very revealing. The hon. Member for Newcastle upon Tyne, Central said: 
 ''So if some very well-meaning grandma puts money into this Child Trust Fund for their grandchild, could they put themselves in a position of depriving themselves of capital?'' 
Mr. Holgate replied: 
 ''That is a very good question. I am conscious of parliamentary questions and answers going on at the moment with various, as it were, permutations on the theme. I think, yes, that is a possibility.'' 
My hon. Friend the Member for Bury St. Edmunds (Mr. Ruffley) then asked in his punchy style: 
 ''After two years, with some of the greatest minds in HM Treasury and the Revenue, you have not come up with a solution? It is pretty pathetic, is it not?'' 
Mr. Holgate responded: 
 ''No, because the Committee has not yet seen the Bill''. 
Obviously, he was looking forward to these sittings. He continued: 
 ''Parliament has not yet discussed the Bill''. 
My hon. Friend then said: 
 ''This is a flaw at the heart of the structure.'' 
To which Mr. Holgate replied: 
 ''It is a flaw at the heart of the structure only if it is still there in 18 years' time. I think that you have to wait and see what ministers say when it comes to a later point in your deliberations.'' 
Finally, the hon. Member for Wallasey (Angela Eagle) asked a tough question. When she does that, we know that there is a real problem. She said: 
 ''You might admit at least that there are some issues of concern round the interaction between these old benefit rules and the more innovative systems being brought forward to deal, for example, with wealth allocation.'' 
Mr. Holgate said: 
 ''Yes, we are alive to that.'' 
Mr. Holgate was all over the place when he gave evidence. He looked forward to this sitting, and suggested that the Minister might have some answers to the points raised by the hon. Member for Yeovil. I look forward to hearing them.

Ruth Kelly: The hon. Member for Yeovil makes an interesting point about capital deprivation rules, and wants clarification and complete certainty that no grandma, no matter what her circumstances, will fall
 foul of the DWP rules on anti-abuse if she makes a contribution, whatever the size, to a child trust fund. I cannot give the Committee that certainty, because of course the DWP have anti-abuse measures in place to ensure that people to do not unreasonably get rid of their capital solely in order to increase the amount of benefit to which they are entitled. There is a necessary element of discretion in the system to stop such abuse. Under the pension credit system, a grandma in the situation that the hon. Gentleman describes would have to have income close to or greater than the £6,000 threshold to be in that position, because the first £6,000 is disregarded. Only 13 to 14 per cent. of pension credit recipients have capital above the £6,000 limit, so families on lower incomes whom he seems so keen to ensure benefit from this excellent policy are unlikely to do so.
 We, too, are concerned that lower-income families should have the opportunity to benefit. The Inland Revenue assures me that the capital deprivation rules will be applied in a fair and consistent manner to the child trust fund, as they are to all payments relating to possible proceedings under deprivation of capital. It would be completely reasonable to assume that it is unlikely that modest contributions to a child trust fund would be treated as a deprivation of capital. With that on the record, I hope that the hon. Gentleman will withdraw the amendment.

David Laws: I am rather disappointed that the Minister has not gone further in offering clarification. We are shortly to debate some of the steps that the Government have taken to offer protection for those on high incomes, who will be paying thousands of pounds into child trust fund accounts. The Government specifically disallowed some of the tax-avoidance legislation that would prevent such people from exploiting tax loopholes. Here, we are considering a situation to which one would have expected a Labour Minister to be much more sympathetic. People on quite low incomes—the Minister cited £6,000 in savings as though it were an extraordinary amount, whereas it is very little for somebody at any stage of life—will end up subject to the judgment of the fraud department of the Department for Work and Pensions on whether their contributions to a child trust fund account constitute deprivation of capital.
 We know that under the present pension credit rules that would be likely to be regarded as deprivation of capital; that was the exchange that the Financial Secretary had with the hon. Member for Newcastle upon Tyne, Central. I am grateful to the hon. Member for Tatton for having highlighted Mr. Holgate's other contributions to the Select Committee proceedings. He did it extremely effectively. I have been trying to manage the various quotations that I wish to use, but the filing system that the Chancellor of the Exchequer pioneered—the use of bits of sticky paper to find the right page—seems to have failed. However, the hon. Member for Tatton has provided a back-up, and was able to quote the very choice comments that Mr. 
 Holgate made when he appeared before us. Having made no progress in dealing with the issue since it was raised in the Select Committee by the hon. Member for Newcastle upon Tyne, Central, the Government should take fully into account the needs of people on lower incomes, rather than just protecting those on higher incomes.

George Osborne: It is worth remembering that Mr. Holgate agreed that it is
''a flaw at the heart of the structure''. 
That is a telling phrase.

David Laws: Indeed, a very telling phrase. The hon. Gentleman is developing a powerful case. He is making such a strong contribution that he has persuaded me to do what I was already minded to do—to ask whether we might vote on new clause 9 in order to press the Government on this important issue.

Joe Benton: As the hon. Gentleman will be aware, we are discussing new clause 9 with clause stand part. When we come to new clause 9, it can be moved formally.
 Question put and agreed to. 
 Clause 12 ordered to stand part of the Bill.

Clause 13 - Relief from income tax and capital gains tax

David Laws: I beg to move amendment No. 155, in
clause 13, page 7, line 26, at end add—
 '(6) Before this section comes into force the Treasury shall lay before each House of Parliament a report setting out the additional costs to the Exchequer over the period from 1st April 2004 to 31st March 2022 of relief from income tax and capital gains tax as a consequence of the introduction of child trust fund accounts, together with an assessment of the scope for greater tax avoidance activity.'.

Joe Benton: With this it will be convenient to discuss the following: Clause stand part.
 Amendment No. 159, in 
clause 27, page 15, line 12, after '31', insert 
 'and subject to the provisions of section 13'.

David Laws: The key amendment is amendment No. 155; amendment No. 159 is a cross-reference to it. It deals with the way in which contributions to the child trust fund account will be treated for tax purposes. Here, we come to the contrast between the measures that the Minister is willing to take in order to protect the interests of those people on upper incomes, who may be making large contributions into the child trust fund accounts, and the way in which she seems to be treating the issues affecting those on low incomes, including the minimum subscription amount and the deprivation of capital.
 Further interesting exchanges took place in the Treasury Committee. I hope that the hon. Member for Tatton will turn to the appropriate pages so that he can pick me up if I miss any relevant information. This time, I shall quote from another member of the Select Committee, not the hon. Member for Newcastle upon 
 Tyne, Central, at least to begin with. I have no doubt that the Minister will have enjoyed some robust exchanges with the hon. Member for Bury St. Edmunds over the years, and one usually thinks of him as something of a Daily Mail man. Indeed, most of his contributions to the Select Committee tend to end up in the Daily Mail, and the paper seems to be briefed before meetings have ended. 
 On this occasion, the hon. Gentleman paints himself as the scourge of the affluent middle classes, who will potentially benefit from the Government's proposals in the Bill. He is clearly worried that the Bill might simply end up favouring those people on middle and upper incomes, which is why he referred to it as a £500 million PR stunt. In his discussions with the Minister and the ill-fated Mr. Holgate, the hon. Gentleman presses the Treasury on who will benefit from the tax breaks, and on how much they will cost. He expresses the concern that for financially literate middle-class parents who are not getting a tax break at the moment it will be a tax break benefit. The hon. Gentleman says: 
 ''It is the case, is it not, that it''— 
that is the child tax credit and the associated tax changes— 
''will help people who do not really need it?'' 
In the following proceedings, there is some pressure on Treasury officials to give an estimate of the costs of the decision by the Treasury and the Inland Revenue to lay aside existing tax regulations that relate to the amount of income that can be earned by children in their accounts without ending up with a tax charge being applied to the parents who have contributed to it. The existing provision states that if an individual 
 child earns more than £100 in interest income return from a particular financial asset in any financial year it is regarded as tax avoidance by the parent so a tax charge is applied. 
 In clause 13, the Inland Revenue has laid aside that tax legislation to allow people to have unlimited benefit from the tax relief, rather than apply the existing limits that are there to protect the interests of the Exchequer and the taxpayer. Mr. Holgate's initial assessment of the bid in terms of his cost estimate for tax relief—he described it as a ''starting bid to you'' in his evidence to the hon. Gentleman—was that it was ''negligible''. When questioned by the hon. Gentleman, he added: 
 ''Yes, and we will see as time goes by.'' 
That is not particularly reassuring for the interests of the taxpayer. That issue was returned to by the Select Committee when the Minister came before it following the exchanges that had take place with officials earlier. She was pressed for her estimate of how much it would cost to set aside the income tax settlements legislation. She had obviously done some work, because she came up with a higher figure and said that it would be about £10 million.

Ruth Kelly: Less than that.

David Laws: The Minister clarifies that it is less than £10 million. After the Financial Secretary had spoken, Mr. Holgate helpfully chipped in that essentially the assumptions are arbitrary.
 It being twenty-five minutes past Eleven o'clock, The Chairman, adjourned the Committee without Question put, pursuant to the Standing Order. 
Adjourned till Tuesday 20 January at half-past Nine o'clock.